Cape Town – It’s unlikely that Finance Minister Pravin Gordhan will raise taxes next year to fund the R2.5bn required for a 0%-increase in tuition fees for 2017, said KPMG economist Christie Viljoen
In Gordhan’s Medium-Term Budget Policy Statement, which is to be delivered on 25 October, he will announce plans for financing zero fee increases for up to 80% of students, which could amount to R2.5bn, according to an initial estimate by universities.
The mooted amount, Viljoen told Fin24, represents about 0.25% of the R1tr total budget, which Gordhan will probably get from government savings, such as on travel and subsistence costs, entertainment and monies recovered from wasteful and irregular expenditure.
“I very much doubt it that it will result in tax increases next year,” Viljoen said, “as National Treasury will have long-term plans in place for the funding shortfall.”
But despite this, KPMG’s latest thought leadership report highlighted a number of challenges, which need to be taken into account if a fully public-funded tertiary education model in South Africa can be implemented.
- There has been a sharp increase in tertiary education fees recently. Data from Statistics South Africa indicates that tertiary education costs an average of 9% per year more during 2009 to 2015 – resulting in a cumulative increase of 80% since 2008. This is significantly higher than the average headline inflation rate of 5.5% per year and a cumulative inflation rate of 45% of the period.
- The reasons behind a significant rise in tuition are associated with exchange rate weakness inflating the cost of imported textbooks, equipment, software, etc. and a decline in private income earned by universities that needs to be recouped from students.
- Public sector transfers to universities remained around the 40% level (of total university income) during 2009 to 2013. When considering the impact of inflation, real state expenditure per student has remained relatively constant, and in 2013, was on a similar inflation-adjusted level to 2005.
- The National Student Financial Aid Scheme (NSFAS) provides financial aid for poor yet academically eligible students. NSFAS, however, only applies to the poorest of households, thus creating a so-called “missing middle” for many students who cannot afford higher education but are from families that earn above the R160 000 threshold.
- South Africa’s economic characteristics compared to a group of 13 countries that have free or almost-free tertiary education (bachelor’s degrees) show we’re not on equal footing. The data indicates that South Africa has little room to manoeuvre towards implementing tuition-free tertiary education compared to these countries.
- Due to the costs associated with tertiary education in South Africa, alternatives could prove attractive, such as the training of artisans, on-the-job training (in which South Africa already performs well in a global perspective), and internet-based education.
Earlier this year, the National Treasury planned for a 13% (R3.6bn) increase in subsidies to tertiary institutions during the 2017/18 fiscal year – that was before Minister of Higher Education and Training, Blade Nzimande committed the state to finding even more money.
Universities need to increase funding outside the sphere of state financing and tuition fees. Options include incentivising the private sector to share funding costs, using technology to improve access, and getting communities involved to reduce indirect costs, said Viljoen.Read Fin24's top stories trending on Twitter: Fin24’s top stories